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UPDATED: United Potato not protected by Capper-Volstead

(UPDATED COVERAGE, 3:05 p.m., Dec. 15) The Capper-Volstead Act does not protect United Potato Growers of America from charges it illegally reduced the supply of potatoes in order to raise prices, according to an Idaho judge’s ruling in an ongoing case.

But United Potato’s president said that, despite reactions to the contrary, the ruling “is not a negative.” And a lawyer who counsels the co-op is optimistic the judge’s mind can be changed on the issue before the end of the trial.

In a Dec. 2 ruling, U.S. District Court of Idaho judge Lynn Winmill rejected Salt Lake City-based United Potato’s motion to dismiss a suit brought against it by Jamestown, N.Y.-based Brigiotta’s Farmland Produce and Garden Center Inc.

The court did, however, dismiss charges against several individual grower-shippers who were co-defendants in the case.

Tom Galbato, Brigiotta’s co-owner, would not comment on the ruling.

In its complaint, filed in 2010, Brigiotta’s accused United Potato of “classic cartel behavior” to control potato supplies and fix prices at artificially high levels.

In its motion for dismissal, United Potato argued that its practice of limiting U.S. potato acreage in order to strengthen markets is protected under the Capper-Volstead Act, which provides agricultural cooperatives limited exemption from federal antitrust laws.

Winmill ruled United Potato had no basis to make that claim.

“There are no cases where a court has concluded that Capper-Volstead immunizes cooperatives and their members who seek to collectively implement production controls in order to raise prices,” Winmill wrote in the ruling. “The individual freedom to produce more in times of high prices is a quintessential safeguard against Capper-Volstead abuse.”

Jerry Wright, United Potato’s president and chief executive officer, declined to comment on the specifics of the ruling until he had a chance to explain it to board members and state-level United Potato co-ops.

But he did say that initial negative reactions to the ruling were misplaced.

“Even though there are a lot of people out there viewing this as ‘The sky is falling,’ it’s not,” Wright said.

Winmill’s ruling came on the same day Wright took over the top jobs at United Potato. Wright replaced Lee Frankel, who parted ways with the co-op the week of Nov. 28. Wright said there was no connection between Winmill’s ruling and Frankel’s departure.

Randon Wilson, a Salt Lake City-based attorney who has helped found several agricultural co-ops, including United Potato, and who provides outside counsel to the co-op, said that no other court in the 85 years since Capper-Volstead was passed has ruled as Winmill did, specifically on the issue of “production controls” — limits placed on plantings.

As the case progresses, Wilson said attorneys for United Potato will be able to make a more comprehensive argument in favor of United Potato’s protection under Capper-Volstead, and he is optimistic Winmill will change his mind.

That said, United Potato is not taking the ruling lightly, Wilson said. Nor are other agricultural co-ops.

“I’ve had calls from several co-ops, people asking ‘What’s going on?’” he said. “Obviously this ruling is of concern for co-ops across the land.”

While the lawsuit against United Potato and some individual grower-shippers will proceed, Winmill granted requests for dismissal filed by United Potato Growers of Canada and five grower-shippers:

Dole Food Co. Inc.

Potandon Produce LLC

R.D. Offut Co.

Pleasant Valley Potato Inc.

Idahoan Foods LLC

Plaintiffs can, however, filed amended complaints against Potandon, Offut, Pleasant Valley and Idahoan Foods. They may not file them against Dole or United Potato Growers of Canada.

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About the Author:

Andy Nelson, markets editor

Andy Nelson joined The Packer as a staff writer in 2001. He became the paper's Handling & Distributing editor in 2005 and markets editor in 2006. Before joining Vance, Nelson was a staff writer for The Kansas City Star.